Paying-to-Play in Securities Class Actions: A Look at Lawyers' Campaign Contributions

The PSLRA’s presumption that the class member with the largest financial interest would be named lead plaintiff was meant to place the class, instead of its lawyers, in charge of the litigation. Congress hoped that institutional investment funds, such as public pension funds, would serve as the new lead plaintiffs.

At first, it seemed that the PSLRA was successful at installing institutional investors as lead plaintiffs and reducing the power imbalance between class counsel and their clients. Today there are new fears that plaintiffs’ lawyers have co-opted securities class actions by paying-to-play. “Paying-to-play” describes the practice of lawyers making campaign contributions to public pension funds’ political leadership in order to gain favorable consideration by the funds for appointment as class counsel.